Zimbabwe - Falling wages and rising unemployment: The negative side of structural adjustment

ZIMBABWE

FALLING WAGES AND RISING UNEMPLOYMENT: THE NEGATIVE SIDE OF STRUCTURAL ADJUSTMENT

Inadequate employment growth in Zimbabwe has become a problem of increasing concern. Although the Zimbabwean formal sector accounts for a larger share of the total labour force than in many other African countries, the number of jobs is expanding nowhere near fast enough to absorb the 200,000 new entrants to the workforce each year.

Some new workers are taken on by small and medium enterprises, but the rate of absorption is too low to reduce unemployment. Incomes too are falling well behind the rate of price increases. When Zimbabwe gained independence in 1980, it inherited highly unequal distribution of wealth and incomes and widespread poverty, especially in rural areas. Real GDP per capita fluctuated widely between 1980 and 1991, but remained basically stagnant. In 1992--a year of severe drought--real GDP dropped by 14 per cent per head.

STRUCTURAL ADJUSTMENT

Zimbabwe's Economic and Structural Adjustment Programme (ESAP) is widely unpopular with trade unionists and workers. In the view of Morgan Tsvangirai, secretary general of the Zimbabwe Congress of Trade Unions (ZCTU): "There has always been a gap between political promises and practice, but this has certainly widened under the Structural Adjustment Programme."

The terms of the Programme were agreed by the Government of Zimbabwe with the IMF and the World Bank at the end of 1990 and it was put into effect in spring 1991. It consists of a comprehensive set of reform policies affecting the government budget, public enterprises, the trade regime, deregulation and the social dimensions of adjustment. The major aim of the budget policies is to reduce the central government deficit from 10 per cent of GDP in 1992 to less than 4 per cent in 1995. Cuts in income tax rates and import duties mean that the budget deficit has to be reduced by means of cuts in health and education expenditure, reductions in the civil service wage bill and removal of subsidies for parastatal companies.

Trade restrictions are also gradually being removed and deregulation has been introduced in other areas. Price controls have been lifted on virtually all consumer goods; agricultural prices have been increased to diminish marketing board losses; and investment procedures have been streamlined.

These reform policies...